Oz tax reforms to affect Australian and international expats

Posted On: October 6, 2017

The latest changes in Australia’s housing affordability laws are likely to have an effect on property sales tax liabilities for Australian citizens and associated property taxes for expats living and working in the country as well as property investors.

Firstly, Aussie citizens living overseas may lose their Capital Gains Tax exemption on the sale of their former main residence. Apparently, this change is being introduced in order to allow Australian buyers to purchase homes. Housing affordability is the focus of the reform and other policy changes in property investment rules.

At present, Australian residents enjoy full exemption from Capital Gains Tax on the sale of a main home, with the capital gain incorporated in individual taxable income totals and paid via income tax. Partial exemptions apply if the property was a main residence for part of the ownership period as long as it wasn’t rented out.

Australian expats living and working overseas have been able to qualify as non-tax residents, but the new policy will no longer allow the absence rule, nor will it grant partial exemption from CTG for the time the home was the owner’s main residence.

Home-owning expats living in Australia are to be exempt from CGT on the sale of their property, provided they are living overseas when the sale takes place. However, a new ‘ghost house’ levy will be applicable to foreign owners should the property be either unoccupied or available for renting for at least six months in any one year.

The proposed changes will apply to homes purchased after May 9 this year, with those bought earlier being given until the end of June 2019 to sell them under the CGT exemption. Investors owning property which is not their main home for a period of over 12 months can still receive a 50 per cent CGT discount on its sale, but non-residents are disallowed from claiming the discount.

Expats planning to invest in Australian property are advised to seek professional advice, as the new rules can lead to complications as regards tax.